H share Beijing North Star says its existing land bank will not be used to build the so-called economically suitable housing projects, after a State Council directive last month capped the net profit margin on such projects at 3 per cent. Chairman Sha Wanquan said the decision did not represent a reversal of its latest strategy of 'actively participating in the development of economic housing' to benefit from the government's housing reform. Company officials conceded there was concern in the market over Beijing-imposed margins on economically suitable housing. Mr Sha said the land bank could be better utilised on the construction of the so-called commodity housing - higher-end development projects with fatter margins, of as much as 20 per cent. Beijing North Star has a land bank of 2.6 million square metres of gross floor area. The company said that it would boost land reserves, although analysts had reported it had suspended replenishment of its land bank until details of the housing reforms policy were available. Red chip China Resources Beijing Land was the other Beijing property developer to stop increasing its land bank due to the change on housing reform, analysts said. Mr Sha said the company could yield a 15 per cent return on equity for economically suitable housing projects despite last month's directive by the State Council to limit profit margins of developers to 3 per cent of the the investment. Mr Sha's calculation, however, is made on the assumption that the company could borrow at least 80 per cent of the investment, with the rest coming from internal resources. Property developers and investors are still pondering the impact of the new rules on housing reforms.